California moves to take steps against illegal debt collection tactics as federal agency cracks down on widespread abuses
Sacramento – The California State Assembly approved two bills by Senator Bob Wieckowski (D-Fremont) to help low-income Californians living paycheck to paycheck keep more of their earnings from being garnished and to protect the due process rights of all consumers fighting abusive tactics by debt collectors. The bills, SB 501 and SB 641, head back to the Senate for concurrence on Assembly amendments before heading to the Governor’s desk. They are part of Wieckowski’s Economic Equity and Financial Stability Initiative to decrease income inequality by helping people make ends meet and reduce the burden of debt.
“This is a great victory for all those families working to climb out of debt and for California consumers harassed by debt collectors for debts they don’t owe or have already paid off,” said Wieckowski, a member of the Senate’s Judiciary Committee. “As a bankruptcy attorney, I’ve spent almost 30 years helping people reduce their debt and regain their financial stability. These bills will give families the breathing room and the tools to become self-sufficient and get back on their feet.”
SB 641 targets abusive tactics of debt collectors by giving consumers more legal recourses to fight their case in court and protect their due process rights. The bill passed the same day the federal Consumer Financial Protection Bureau sued debt buyers for a number of illegal tactics against consumers and ordered them to pay $61 million in refunds and stop collections on over $125 million worth of debt. The CFPB found that the two largest debt buyers, Encore Capital Group and Portfolio Recovery Associates, threatened and deceived consumers and filed lawsuits against them without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves.
Under SB 641, consumers would be able to ask a court to set aside default judgments and contest their cases on the merits. Currently, if a case is over two years old, consumers have to get an attorney and file a lawsuit, a process that is too costly for low-income Californians.
SB 501 creates a tiered-garnishment rate to lower the high percentage of income currently taken from low-income workers’ paychecks, allowing them to meet their basic needs for food, rent and medical bills.
A third bill, SB 308, to allow debtors to retain enough of their assets so they can get back on their feet after a bankruptcy, failed to gain approval in the Assembly.
The bills are supported by Attorney General Kamala D. Harris, State Treasurer John Chiang, Senate President Pro Tem Kevin de León, the East Bay Community Law Center, Western Center on Law and Poverty, and legal aid clinics, consumer organizations, and labor.
Senator Wieckowski represents the 10th Senate District, which includes southern Alameda County and parts of Santa Clara County.